A surge in demand for larger office space in HCM City and the willingness of companies to pay for them speak of the potential of the city office market. — Photo danviet,vn

While it was rare to see transactions for office space exceeding 10,000sq.m in HCM City in recent years, the first quarter of this year witnessed three such leasing deals at some new buildings, according to property consultancy Knight Frank Vietnam.

In a report, it said new buildings entering the market raised the asking rents for grade A space marginally to US$58.06 per square metre per month.

The grade A vacancy rate is 16.7 per cent following absorption of nearly 32,000sq.m during the quarter mostly driven by good pre-leasing activities in The Nexus, a high-end office building in District 1 and one of two new buildings entering the market in Q1 with large transactions involving 2,000-10,000 sq.m.

Grade B reported a healthy performance, with asking rents at $34.31, a 0.5 per cent increase quarter-on-quarter.

Leo Nguyễn, Knight Frank’s director of occupier strategy and solutions, said: “In the past, it was rare for us to see big transactions of over 10,000 sq.m in the city, but this year we have seen three.

“These deals indicate a growing need for substantial office spaces due to expansion by foreign businesses. This surge in demand represents a potential uptick in business activities and a positive outlook for Việt Nam’s commercial real estate market.”

There were also other major transactions of more than 2,000 sq.m (72 per cent), mostly by technology (75 per cent), retail (9 per cent) and pharmaceuticals (6 per cent) companies and for relocation purposes (94 per cent), he said.

Many companies that relocated have also opted to lease more space than in their previous location, he said.

“This suggests that these companies are experiencing growth and need additional space to accommodate their expanding operations. While some businesses may be facing challenges, others are seizing opportunities and positioning themselves for growth in the country.

He said several new buildings have achieved occupancy rates of 70-80 per cent in a relatively short time, including The Hallmark in the Thủ Thiêm peninsula, The Nexus in District 1 and the OfficeHaus project in Tân Phú District.

This year, an additional 80,000sq.m of grade A office space at The Sun Tower in District 1 and 52,780sq.m of grade B space at buildings such as Etown 6, and D' Saint Raffles will enter the market.

Knight Frank predicted that massive new supply in Grade A, likely with high asking rent, is expected to hike asking rents and vacancy to the range of $60 psq.m per month and 27 per cent.

Grade B performance is expected to reflect gradually decreasing asking rents and vacancy rates to the range of $33 per sq.m per month and 13 per cent.

Talking about the outlook for the HCM City office market, Leo said: “Many office buildings in HCM City have been over 90 per cent occupied for several years. However, given the increased space, occupancy rates are expected to drop in older buildings when tenants move to new buildings. — VNS